Labor unions no longer beneficial

September 4, 2010

Freedom New Mexico

More people could be free to rest this Labor Day weekend, although many won’t be doing it voluntarily.

We entered the holiday with mixed, but mostly disappointing, news on the economic front. The Labor Department on Friday gave an apparently contradictory report that American employers added 67,000 new jobs last month, even as the unemployment rate rose again, from 9.5 percent to 9.6 percent.

A closer look shows the new jobs figure is for private industry only. Part of the rise in unemployment comes from the release of some 114,000 people who had been hired temporarily to help with the national census. State and local governments reportedly have dropped another 10,000 workers as they struggle to balance their next fiscal budgets. The end of active war in Iraq could add to those numbers as returning veterans start looking for work.

And these numbers don’t include all those whose unemployment compensation benefits have run out because they have been unemployed for a long time; they often simply fall off the unemployment charts. Congress has extended benefits beyond the statutory six months, but many people have given up looking for work as the much-hyped economic improvements fail to materialize.

In addition, worker productivity fell during the second quarter of the year, at a 1.8 annual rate. Analysts suggest that companies who have reduced staff have piled about as much work on the remaining workers as they can handle, and have reached a point of diminishing returns. Of course, federal spinmeisters have sought to put a happy face on this news, saying that employers now have no choice but to start hiring new workers.

That affordability could be worth a look as we commemorate the holiday that was created to celebrate trade unions. Union membership has fallen to under 10 percent nationwide in private industry, as more businesses find it impossible to pay union-level benefits and keep their prices competitive. As such, many have increased their presence in right-to-work states like Texas, or fled the United States altogether.

That flight has occurred primarily in the manufacturing industries, which traditionally have the heaviest union participation. Our national economy continues to grow mostly in the white-collar sector, such as retail jobs and financial or technical services. These are jobs where value often is measured by the quality of service, not by the price of a tangible item that can be compared to something similar built by a competitor.

A century ago labor unions helped pressure businesses into establishing safer, more reasonable working conditions for their employees. For that we all owe them our gratitude. More recently, employee rights often are secured by individual workers who are more knowledgeable and assertive, rather than through the collective bargaining process.

That process does, however, maintain upward pressure on salaries, which is good for the specific workers who benefit. It’s fair to argue, however, that this pressure is the greatest contributor to companies’ decision to move their operations to other countries. Higher salary costs force companies to charge more in order to remain profitable, and leaves them unable to compete with lower-cost competition from overseas. They can’t beat them, so they join them in those labor markets. The only sector where union membership remains high is in government, which has no competition.

It can be argued that by creating conditions that drive employers to other countries, unions might now be doing more harm than good. On this Labor Day weekend, we might want to ask: Have unions, which continue to fight for compulsory membership to benefit their own ranks, outlived their usefulness?